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Do private schools avoid voucher programs because of excessive regulation?

The demand side of voucher programs is often studied, as are student outcomes. Far less analyzed is the supply side of the equation—why private schools do or don’t participate in publicly funded voucher programs. A recent analysis released by the Cato Institute looks to redress that balance. Unfortunately, the effort founders due to the limitations of the study design.

Researchers Corey DeAngelis and Blake Hoarty sensibly theorize that when the costs of participation (increased regulation imposed on schools by the state) outweigh the benefits of greater enrollment and more revenue, private schools will opt not to participate. That is, they’ll refuse to accept voucher students. The researchers further theorize that lower-quality schools will have more incentive to participate due to the need for funding and will more readily accept regulation in order to gain the additional funding. If true, this would tend to reduce access to high quality educational options rather than expanding access.

DeAngelis and Hoarty reviewed two voucher programs: the Milwaukee Parental Choice Program (MPCP) and Ohio’s Educational Choice Scholarship Program (EdChoice). These were chosen because they are two of three such programs with the highest regulatory burden upon them, according to a Fordham-sponsored report published in 2013. To test the school-quality theory, DeAngelis and Hoarty used four data sources—tuition rate, enrollment, and two different online review scores—as proxies for school quality. The higher the tuition, enrollment, and customer scores on Google and GreatSchools, the better the school was determined to be and the less likely the school should be to participate in the voucher program.

The researchers found that a $1,000 increase in tuition was associated with a 3 percent lower likelihood of participation in MPCP and a 3.8 percent lower likelihood of participation in EdChoice. However, school enrollment level was not found to significantly affect likelihood of participation in either program. Likewise, while a one-point increase in a GreatSchools review score was associated with a 14.8 percent reduction in the likelihood of participation in MPCP and a 17.8 percent reduction in the likelihood of participation in EdChoice, Google review scores were not found to significantly affect likelihood of participation in either program. From these findings, DeAngelis and Hoarty conclude that their theory—that lower-quality schools are more willing to put up with the regulatory burden in exchange for access to additional money—is “the strongest theory currently available” that fits the correlational connection in the data.

And herein lies the limitation of this analysis: the existence of strong yet untestable alternative theories.

DeAngelis and Hoarty note that the average private school in the samples from both Google and GreatSchools were less than one point away from the maximum possible rating, indicating that most schools—whether voucher participants or not—are clustered at or near the top of the scale. While the lowest-rated schools may be the most likely to participate, these are largely outliers. Another strong theory would posit that, since all such ratings systems are subjective, ratings could be dragged down or up based on a host of non-academic criteria, such as lunch programs, extracurricular activities, neighborhood location, and bus transportation. Additionally, the researchers note that such open source ratings could suffer from bias introduced by ratings from non-customers. However, a far more in-depth analysis would be required to test this theory. Meanwhile, school enrollment level—not susceptible to such bias and likely a more robust marker of school quality in states with robust school choice environments—is shown not to significantly affect participation decisions. We accept the testable over the non-testable theory at our peril.

The notion of regulation of private schools within voucher programs is similarly problematic. Despite ranking first and third on the Fordham report’s overall scale of “regulatory burden,” MPCP and EdChoice varied greatly in the various domains classified as burdens. Indeed, of the seven specific areas of regulation listed for MPCP by DeAngelis and Hoarty, EdChoice shares only two of them. Private schools in Ohio have a long history of state support. Since the 1960s, students attending private school have been provided state funded transportation, or parental payment in lieu of transportation, followed in the 1970s by assistance to schools to purchase secular textbooks and curricular materials, and in the 1980s by reimbursements for hiring psychologists and therapists, among many other administrative expenses. In exchange for this largesse, amounting to over $206 million in 2016, or more than $1,000 per pupil, private schools in Ohio have voluntarily agreed to more oversight by the state than is typical elsewhere. The increased regulatory “burden” upon Ohio’s private schools for accepting students with vouchers is negligible and is part and parcel of the strong relationship between the state and those schools, which long predates EdChoice and includes private school voucher participants and non-participants alike.

Additionally, the topic of student eligibility is treated too generally in the analysis. It makes sense to assume that most private schools in Milwaukee would be within reasonable travel distance for all eligible students—pegged at 69 percent of the student body. However, there are parts of Ohio in which the eligibility rate is 100 percent and other parts in which the eligibility rate is zero. If there are no eligible students within reasonable travel distance of a highly-rated private school, it will be a non-participant whether or not the leadership wants to participate. The supply of eligible students is a direct determining factor in private schools’ choice to participate not accounted for in the Ohio analysis. That is not tested here, although it could have been.

Finally, the one variable that would likely have the most direct effect on a private school’s participation decision is the amount of money voucher bring in. It is not analyzed here because there is no experimental comparison to be made. The average voucher funding amount for MPCP is $7,503 per student, approximately 65 percent of the average public school per pupil funding level in Milwaukee. The average voucher funding amount for EdChoice is a mere $4,705, approximately 37 percent of the average public school per pupil funding level in Ohio. These are paltry amounts compared to average tuition costs and once again call into question whether private schools are really in the voucher game for the money. What would be the effect of raising voucher amounts by increments of $1,000 on school participation? Impossible to tell without a state doing just that, but there is clearly room for Wisconsin and Ohio to raise voucher amounts while still maintaining a net savings for education spending in each state. In Ohio, the lowest-performing school districts—where a majority of voucher-eligible students live—typically receive per-pupil funding well in excess of the state average, leaving even more room for voucher funding levels to rise. That would be an experiment worth doing.

In the end, DeAngelis and Hoarty are right only in their basic assumption: that participation decisions for private schools are based on a balance of benefits versus costs. While they assert that excessive regulation is the “strongest theory currently available” to explain the observed levels of private school participation in MPCP and EdChoice, real world details are too lacking on both the benefits and the costs to truly rule out any of a number of other theories.